One way Netflix grew to be so popular worldwide is password sharing. Last year, Netflix reported that 222 million households pay for a subscription and another 100 million use a shared account. Of that number, 30 million shared account households are located in the US and Canada.
After losing 200,000 subscribers in 2022 and facing increasing competition from Amazon Prime, AppleTV,
Disney+ and Hulu, Netflix is desperate to monetize those shared accounts. Now the company has announced, via a detailed letter to shareholders, its plans to increase revenue by charging US subscribers to share their password.
Blame the Canucks
Paid memberships increased after imposing the plan in Canada earlier this year. “In Canada, which we
believe is a reliable predictor for the US, our paid membership base is now larger than prior to the launch of paid sharing and revenue growth has accelerated and is now growing faster than in the US,” the letter claimed.
Paid sharing tests were also successful in Latin America last year. After initially seeing cancellations in three test countries, Netflix saw increased subscriptions and revenue as account sharers began activating their own paid accounts and existing subscribers added paid shared accounts, according to the letter.
“Longer term, paid sharing will ensure a bigger revenue base from which we can grow as we improve our service,” Netflix added. “Widespread account sharing undermines our ability to invest in and improve Netflix for our paying members, as well as build our business,”
Watching on Borrowed Time
After planning an initial rollout of the paid sharing program broadly in early 2023, the company decided to delay this initiative. “We’re pleased with the most recent launches of paid sharing, and while we could have launched broadly in Q1, we found opportunities to improve the experience for members”, the letter reads.
When Netflix implements paid sharing of accounts in the US, users will be required to set a primary location. While Netflix hasn’t announced the fee for sharing the account outside the primary location, if it’s similar to what was charged in Canada ($7.99 CAD), it would cost $5 or 6 USD per month.
Additionally, Netflix said it would make changes to its advertising plan rolled out last year. The plan allows users to pay less for a subscription with ads. The letter states that average revenue per member for the accounts with ads, is actually greater than the higher priced plans without ads.
So Netflix is improving the plan with ads by increasing the video resolution from 720p to 1080p, with two household streams.
